Unit 4: Production Analysis — Online MCQ Test
ECONOMICS · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board
Practice Unit 4: Production Analysis with a free chapter-wise online MCQ test.
This chapter covers: This chapter details production function Law of Variable Proportions Law of Returns to Scale production cost concepts revenue concepts and economies of scale..
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Unit 4: Production Analysis — Important Questions & Answers
What is meant by a production function in economics?
- A. The relationship between money income and demand
- B. The relationship between inputs and output
- C. The relationship between price and supply
- D. The relationship between cost and revenue
Answer: B. The relationship between inputs and output
A production function shows the technical relationship between inputs used and the output produced. It explains how output changes when inputs change.
A production function shows the technical relationship between inputs used and the output produced. It explains how output changes when inputs change.
Which law states that when one input is increased while other inputs remain fixed, output first rises at an increasing rate, then at a diminishing rate?
- A. Law of Demand
- B. Law of Supply
- C. Law of Variable Proportions
- D. Law of Returns to Scale
Answer: C. Law of Variable Proportions
The Law of Variable Proportions applies in the short run when only one factor is varied and others are fixed. It explains stages of increasing, diminishing, and negative returns.
The Law of Variable Proportions applies in the short run when only one factor is varied and others are fixed. It explains stages of increasing, diminishing, and negative returns.
If a firm increases all inputs by 10% and output also increases by 10%, it is called:
- A. Increasing returns to scale
- B. Constant returns to scale
- C. Diminishing returns to scale
- D. Negative returns to scale
Answer: B. Constant returns to scale
When output changes in the same proportion as all inputs, the firm experiences constant returns to scale. This is a long-run concept.
When output changes in the same proportion as all inputs, the firm experiences constant returns to scale. This is a long-run concept.
A factory adds more workers to a fixed number of machines. Output increases at first, but after a point, output per worker starts falling. This is due to:
- A. Law of demand
- B. Law of diminishing marginal returns
- C. Returns to scale
- D. Economies of scale
Answer: B. Law of diminishing marginal returns
When additional workers are added to fixed machines, the productivity of each extra worker eventually falls. This is the diminishing marginal returns phase under variable proportions.
When additional workers are added to fixed machines, the productivity of each extra worker eventually falls. This is the diminishing marginal returns phase under variable proportions.
Which of the following is the best example of a variable cost?
- A. Depreciation on machinery
- B. Factory rent
- C. Wages of temporary workers
- D. Insurance premium
Answer: C. Wages of temporary workers
Variable costs change with the level of output. Wages paid to temporary workers usually rise when more production is required.
Variable costs change with the level of output. Wages paid to temporary workers usually rise when more production is required.